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Well-developed stock markets can save CO2

2019-11-27T14:11:17.173Z


How can countries pursue sustainable environmental policies? Maybe also through their stock markets. According to the European Central Bank, corporate finance is greener for them than for banks.



The stock markets can help to reduce the carbon dioxide emissions of an economy. These are better than banks in directing investment in green areas, writes the European Central Bank in a research report on finance and decarbonisation.

The study suggests that in economies where corporate financing is more likely to go through the stock market, fewer pollutant emissions are generated than in those where financing is more likely through the banking sector. Although the authors also note that this effect could be offset by a shift of emissions abroad. However, this effect is far from strong enough to offset the mitigating effect of developed equity markets.

Green credit guidelines recommended for banks

The authors cite two reasons for their results. On the one hand, innovative and energy-efficient companies generally perform better in countries with strong equity markets. On the other hand, environmentally friendly companies faced fewer lawsuits due to their involvement in environmental disasters. Stock investors put special value on this.

The study therefore recommends that countries with strong banking-based financial systems and the goal of green policies should also promote the stock market itself. A focus on novel investment forms such as green bonds is not enough.

Banks may also be required to publish environmental information about the companies they are financing through credit. Environmentally friendly credit guidelines are also conceivable.

Source: spiegel

All business articles on 2019-11-27

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